General partnership problem

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Reference no: EM13147130

Celeste contributed business-related assets valued at $250,000(basis of $100,000) in exchange for her 50% interest in the Celestine Partnership. Ernestine contributed land and a building valued at $400,000(basis of $200,000) in exchange for the remaining 50% interest. Ernestine's property was encumbered by a qualified nonrecourse debt of $150, 000, which was assumed by the partnership. The partnership reports the following income and expenses for the current tax year:

Sales 350,000
Utilities, salaries, and other operating expenses- $190,000
Qualified dividend income- $6,000
Tax-exempt interest income - $2,000
Charitable contributions - $1000
Distribution to Celeste -$20,000
Distribution to Ernestine - $16,000

a. How would Celestine's ending liabilities be treated if they formed an LLC, instead of a general partnership?

b. How would Celestine's basis and amount at risk be different?

Reference no: EM13147130

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